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In NAFTA, the Rules of Origin refer to product specific rules that stipulate what must happen to inputs from non-NAFTA countries for the final, exported product to qualify for NAFTA benefits. The rules are listed in HTSUS General Note 12(t) by HS code heading or subheading and may require a tariff shift which means that the foreign input must have a different heading or subheading than the exported product. Rules of origin may also require that exported products with foreign inputs contain at least a certain amount of value-added from the U.S. or other NAFTA countries.
This video provides further explanation of NAFTA Rules of Origin.
Interpreting NAFTA Rules of Origin
A rule of origin might contain
1) a change in tariff classification;
2) a regional value-content requirement; or
3) both a change in tariff classification and a regional value content requirement.
Note: It is necessary to refer to the rule associated with the product being exported. Regional value content can only be applied when it is allowed under a product-specific rule.
Example of a rule of origin:
Please note that within the rules of origin chapter refers to the first two (2) digits of the HS code, heading refers to the first four (4) digits of the HS code, and subheading refers to the first (6) digits of the HS code.
Rule of Origin: "A change to heading 1902 through 1905 from any other chapter."
Products: Breads, pastries, cakes, biscuits (HS 1905.90)
Non-NAFTA input: Flour (classified in HS chapter 11), imported from Europe.
Explanation: For all products classified in HS headings 1902 through 1905, all non-NAFTA inputs must be classified in an HS chapter other than HS chapter 19 in order for the product to obtain preferential duty treatment. These baked goods would qualify for tariff preference because the non-originating goods are classified outside of HS chapter 19. (The flour is in chapter 11). However, if these products were produced with non-originating mixes, then these products would not qualify because mixes are classified in HS chapter 19, the same chapter as baked goods.
Other Factors: A thorough reading of Chapter Four of the NAFTA is necessary for anyone attempting to determine the origin of a product's eligibility for preferential duty rates. However, to improve understanding of these subjects, a brief discussion appears below of some of the factors, beyond the product-specific rules of origin that may be considered in determination of origin.
De Minimis Rule: The de minimis rule provides an additional possibility of qualifying as originating for a good that cannot meet the required